By Ahmad Hassam
I like to take my coffee early in the morning. The first thing I do in the morning is make coffee for myself. Otherwise, my day does not start. How about you? Most probably, you are like me too. We are all alike. We all love to drink coffee. Precisely just because we love coffee too much, coffee is an important global commodity after crude oil. I mean after crude oil, coffee is the second largest traded commodity in the world.

Just like other commodities, coffee production is dominated by a few countries led by Brazil, Columbia and Vietnam. Now, if you want to know more you can visit the website of International Coffee Organization and The National Coffee Association of USA. How about making money from coffee futures while drinking your cup of coffee? Hey, it's not a bad idea!

The coffee futures market is basically used by the coffee producers and purchasers for hedging from wild price swings. In addition to hedging, the coffee futures market provides small investors to profit from fluctuations in the coffee prices. The most liquid coffee futures contracts are provided on the New York Board of Trade (NYBOT).

NYBOT is one of the most popular commodity trading exchanges especially agricultural commodities. Did you watch the movie," Trading Places." It is all about trading orange juice futures. Eddie Murphy and Dan Aykroyd are small time orange juice futures traders about to corner the market. Though, the movie does not show coffee futures trading but you can well imagine the potential of coffee futures and how important they are in our lives.

Now, coffee is a highly volatile commodity full of seasonality, cyclicality and other factors that influence its demand. Geopolitical factors also play a heavy role in the coffee market. The ticker symbol for coffee futures is KC. The size of the coffee futures contract is 37,500 pounds. The expiry months for the coffee futures contracts are March, May, July, September and December.

Now when you buy coffee, you want the right flavor. Similarly, knowing the different type of coffees available for investment is important. Now, the global coffee production is made up of two types of beans:

There are two types of coffee beans that are traded in the coffee market. The first one is the Arabica Coffee. This is the most popular and the most widely grown coffee in the world. It gets grown in Brazil and Indonesia as well as other countries. But these two countries are the largest producers of this variety. More than 60% of the global production is Arabica Coffee. It is expensive than the other variety of coffee that is the Robusta. Robusta is easier to grow as compared to Arabica. It is less expensive than Arabica.

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Now, you know why drinking coffee is a serious business in the world. Coffee craze is spreading all over the world rapidly with Starbucks shops getting opened in China, India as well as other countries. You too can become part of this coffee business and become rich!

(Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies!) Courtesy: PRLog